China can end the trade war by conceding defeat to Trump

Some serious discussions are going on in China as the country faces an escalating trade war with the United States, slowing domestic growth and increasing investment restrictions in the US and Europe. There seems to be recognition that the previous playbook drafted by hardliners has not worked and Beijing needs to change its strategy.

Beijing’s strategy of a tit-for-tat retaliation over tariffs has clearly failed. In fact, this strategy escalated the conflict. The direct retaliation after the US announced the first batch of 25 per cent tariffs on US$50 billion in Chinese goods (with the increase from US$34 billion just finalised and coming into effect on August 23) brought few benefits for China. If anything, it gave the US an excuse to plan for a new batch of tariffs covering US$200 billion in Chinese goods. To be fair, it is possible that the US would have escalated the conflict even if China had not retaliated, but whatever the case may be, China’s strategy did not work.

On the evening of August 3, Beijing decided to implement differentiated tariffs over US$60 billion in US exports and on August 8 released a list of an additional US$16 billion worth of American goods to hit with tariffs. Beijing is nearing its tariff retaliation limit.

It was rumoured that Beijing had been trying to line up with the Europeans, as well as other nations, to fend off the tariff threat from the US, but it seems this strategy is not working either.

America and the EU are best friends. Whoever says we are foes is spreading fake news.

— Donald Tusk (@eucopresident) July 15, 2018

What Europe needs from Beijing to be a better friend to China

On July 26, after European Commission President Jean-Claude Juncker’s visit to Washington, the EU and the US reached an agreement........